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Microsoft has finally acknowledged one of the worst-kept secrets in the tech market in recent weeks: it is entering the handheld entertainment market with a device dubbed Zune, a music player and gaming device.

Gadget sites like Engadget and Gizmodo have been having a field day speculating on the Zune player. It's long been suspected Microsoft was busy designing a potential "iPod killer," but details were slim to none.

"Today we confirmed a new music and entertainment project called Zune," said Chris Stephenson, general manager of marketing for Microsoft . "Under the Zune brand, we will deliver a family of hardware and software products, the first of which will be available this year. We see a great opportunity to bring together technology and community to allow consumers to explore and discover music together."

Two staffers on the Zune project have personalblogs where they are dropping tidbits of Zune info as well.

Some reports on gadget sites speculate that Microsoft is focusing on collaboration and sharing with the first Zune player, allowing users to view each other's playlists and recommend music and sample tracks.

The first device will be a music player with a digital music service, pretty much positioning it to be the iPod killer it was rumored to be, to be followed by a portable video player and possibly a portable game device. Around "seven or eight" devices are envisioned. The devices will be drive-based and have WiFi.

Zune is a part of Microsoft's new Entertainment & Devices Division, which is lead by some very well-regarded minds at the company including Robbie Bach, J Allard (the chief developer of the Xbox 360's design and head of Microsoft XNA initiative -- an ecosystem of interchangeable, interoperable software tools and technologies), and two other XBox veterans, Greg Gibson and Bryan Lee.

Zune is rumored to be introduced next month and in stores by October/November, with more devices in 2007.

The multiple device strategy of Zune is unquestionably aimed at Apple but also in response to Apple, said Rob Enderle, principle analyst with The Enderle Group. "If you think about the strategy here, it's really one where they're trying to overwhelm Apple. Think of it as a flanking move. The caveat here is Apple's gotta see this coming," he said.

He points out that Apple has its shortcomings, notably its DRM doesn't allow for sharing like Zune will do, and hasn't always partnered well. But Apple is also a much better company at hardware design and marketing, which are key to selling something like Zune, he said.

Entering into an entrenched market, against a very successful competitor, might seem like a waste of resources, but Enderle said there's a good reason for it.

"What makes this market attractive to Microsoft is Microsoft doesn't appear to be trendy in any sector," said Enderle. "One reason their stock is trading down is because no one is excited about the company. You need something that excites people, and that won't be Windows any time soon," he said.

But Zune might just be that.

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